Travel + Leisure Co. (TNL) Earnings

Management highlights

- Overall Quarterly and First Half Performance * Q2 2026 total revenue hit $1.06 billion, with total EBITDA of $269 million; revenue grew 4% year-over-year, EBITDA grew 8%, and diluted EPS grew 14% in Q2. * First half 2026 gross VOI sales increased 7% year-over-year, EBITDA grew 9% driven by a 120 basis point margin expansion, and diluted EPS grew 21% amplified by share repurchases. * The company returned $253 million to shareholders via dividends and share repurchases in the first half, reducing outstanding common shares by 4%. * Consumer demand remained healthy: Q2 volume per guest reached $3,318 (up 2% year-over-year, above plan), first half arrivals (adjusted for strategic closures) increased, forward bookings indicate continued second half growth, and booking metrics (109-day booking window, 4-day average length of stay) match or exceed prior year levels. - Recent Acquisitions of Yes And Vacations and Spinnaker Resorts * The company announced the acquisitions post-quarter end, adding 23 total resorts (6 in Hilton Head, 7 in Maui) in high-demand, development-constrained leisure destinations, more than offsetting prior strategic resort closures and improving portfolio quality. * The acquisitions add over 100,000 new owners (expanding the total owner base by more than 10%), ~80% of whom have fully paid off their timeshare loans; this creates a larger embedded audience for future upgrade sales to the company's flexible points-based system. * Total investment is ~$340 million, falling to ~$260 million net after securitizing $80 million of finance receivables, for a net 5x EBITDA multiple; the deals clear return thresholds, are immediately accretive, and have low integration risk as both targets are well-run with established operations. - Multi-Brand Growth Strategy * The multi-brand strategy is scaling successfully: Margaritaville is on track to exceed $150 million in annual VOI sales, Accor Vacation Club sales are on track to nearly double in 2026, Eddie Bauer Adventure Club sales are exceeding expectations, and the Sports Illustrated Nashville resort will open in Q3 with sales already underway. * Combined VOI sales from these co-branded lines are on track to approach 10% of total company sales mix in 2026, reaching new traveler profiles while leveraging existing company scale and infrastructure. - Resort Optimization and Digital Investment * The resort optimization initiative (removing aging, lower-demand properties) continues to perform as expected: cost savings have been realized, and stronger conversion and BPG have more than offset lost tour volume from closed locations, allowing the company to maintain VOI sales growth. * The company is investing in digital infrastructure to improve the owner experience: the new Margaritaville app has launched, and the existing Club Window map tool now accounts for more than 30% of total club bookings. - Capital Allocation * The framework remains unchanged: invest in the core business, return capital to shareholders via dividends and repurchases, and pursue opportunistic M&A when returns exceed those from buying back the company's own shares. * Q2 2026 share repurchases hit ~$88 million, up 25% year-over-year; 2026 full-year repurchases are expected to match 2025 levels, and the acquisitions did not require changes to the company's capital return commitments. * The balance sheet remains strong: leverage ended Q2 below 3.2x (down from 3.4x a year prior), liquidity exceeds $1.2 billion across cash and revolving credit capacity, and a recent $300 million ABS transaction priced at a 5.52% coupon with a 98% advance rate.

Guidance

- The company raised full-year 2026 guidance due to stronger-than-expected core business performance and expected contribution from the newly announced acquisitions. - Excluding acquisitions, full-year 2026 core EBITDA is expected to be between $1.05 billion and $1.065 billion. - The Yes And Vacations and Spinnaker acquisitions are expected to add $15 million to $20 million of incremental EBITDA in 2026, with a full-year run rate of ~$50 million in synergized EBITDA. - Combined full-year 2026 guidance: gross VOI sales of $2.6 billion to $2.675 billion, total EBITDA of $1.065 billion to $1.085 billion. - Organic full-year 2026 loan loss provision rate is expected to be modestly below 2025 levels; including the acquired portfolios, the consolidated provision rate is expected to be approximately 21%. - Additional full-year 2026 assumptions: adjusted tax rate of ~29%, free cash flow conversion of ~50% of EBITDA, full-year diluted EPS growth of ~20%. - Q3 2026 guidance: gross VOI sales of $700 million to $740 million, EBITDA of $275 million to $285 million, volume per guest of $3,300 to $3,350. - Full-year 2026 leverage is expected to end at 3.2x, an increase of 0.2x from pre-acquisition levels.

Segment performance

1. Vacation Ownership Segment: Gross VOI sales increased 6% year-over-year to $693 million. Segment revenue grew 6% to $907 million, accounting for 85.6% of total Q2 2026 revenue. Segment EBITDA increased 13% to $247 million, accounting for 91.8% of total Q2 2026 EBITDA. Tours increased 1% year-over-year, new owner transaction volume and close rates remained healthy, and credit performance was in line with underwriting standards. 2. Travel and Membership Segment: Second quarter revenue declined 5% year-over-year to $157 million, accounting for 14.8% of total Q2 2026 revenue. Segment EBITDA declined 11% to $49 million, accounting for 18.2% of total Q2 2026 EBITDA. The decline reflects ongoing evolution of the segment's exchange business.

Risks & headwinds

- Forward-looking statements are subject to material risks that could cause actual results to differ materially from guidance, with key risk factors outlined in the company's SEC filings. * Integration of the newly acquired resorts and owner bases carries execution risk, though management notes low expected integration risk given the targets' established operations. * The travel and membership exchange business continues to face headwinds that have pressured revenue and EBITDA, requiring ongoing operational improvements to stabilize long-term earnings. * Consumer credit performance could shift unexpectedly, even though early stage delinquencies improved meaningfully in Q2 2026 after a modest uptick in Q1.

Analyst Q&A

• Q: What is the current state of Travel and Leisure's core consumer, and how has demand trended recently? /

  A: Management states consumer demand has remained consistent and strong since the prior quarter, with no signs of weakening. Key metrics including forward bookings, length of stay, travel distance, and new owner sales all hold at strong levels. The company enters Q3 (one of the two highest demand quarters of the year) with solid momentum.

• Q: How have early stage delinquencies and loan loss provisions trended in Q2 2026, after a modest Q1 uptick? /

  A: After a 20 basis point sequential Q1 increase in early stage delinquencies, Q2 saw an 80 basis point sequential improvement, which is double the typical seasonal improvement. This puts delinquency back in line with expected seasonal patterns. Point of sale underwriting remains disciplined, with average FICO scores above 740 and down payment rates in the mid-20s, and organic 2026 provision is still expected to be lower than 2025.

• Q: What drove stronger-than-expected volume per guest (VPG) in Q2 2026? /

  A: Two core factors drove the upside: consumers are purchasing larger vacation ownership packages, and there has been modest annual price increases on available packages. Most of the increase in average transaction price for larger packages came from existing owners, though new owner results were also solid. Management also credited the company's strong sales and marketing team for the consistent outperformance.

• Q: Why did tour flow decelerate slightly in Q2, and how does this align with full-year expectations? /

  A: The modest deceleration was expected, driven by strategic resort closures from the company's resort optimization program, which impacted owner-side tour flow. This was offset by accelerating new owner tours, and higher VPG more than offset the owner tour decline, resulting in VOI sales that came in above original guidance at 6% year-over-year growth. Management notes the full-year outlook remains on track, with growth expected to pick up in the second half.

• Q: What is the expected long-term run rate for EBITDA from the new acquisitions, and when will full synergies be realized? /

  A: The acquisitions are expected to deliver $50 million in full-year synergized EBITDA after close; 2026 only gets 4.5 to 5 months of contribution from the deals, which explains the $15 to $20 million incremental 2026 guidance. Cost synergies will be realized relatively quickly, with full cost synergies expected to be in place by 2027. Revenue synergies from upgrading existing acquired owners to the company's points-based system will take several years to fully realize, as the transition is done thoughtfully.